home buyer Archives - Page 28 of 41 - Real Estate News and Commentary

September 26, 2013July 1, 2019

Are rising interest rates helpful?

After much speculation, mortgage interest rates appear to be on the move. Even with rising interest rates, rates are still relatively low. Some economists expect that when the Fed’s Quantitative Easing program begins tapering, mortgage interest rates may jump due to financial market volatility.

Many fear that rising interest rates could derail the recovering housing market. In an August 19th news release (realtor.org), Chief NAR economist Lawrence Yun stated that although the pace of home sales are at its highest since February 2007, the market could be experiencing a “temporary peak” due to home buyers’ seeking to close deals before interest rates rise significantly. Looking ahead, Dr. Yun expects that rising interest rates and limited inventory could create an imbalanced market due to inconsistent home sales.

Home sale prices also have been rising, prompting bidding wars, as the median home sale price was reported by NAR to have maintained nine consecutive months of double digit year over year increases. However, Dr. Yun stated, “Limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August, although 63 percent sold below list price.”

This week’s release of July’s S&P/Case-Shiller Home Price Index (spindices.com) also revealed that home sale prices were still holding onto the double digit annual rate of gain over 2012 levels, as the 10 city and 20 city composites posted about a 12% year over year increase for July. However, it is pointed out that home price are still “far below their peak levels.”

The sharp increases in home sale prices sparked fears of another housing bubble. But price gains only increased about 2% from June to July. Monthly price gains have lessened, and the gradual slowdown of home price gains may indicate that home prices may be peaking. Chairman of the Index Committee at S&P Dow Jones Indices, David M. Blitzer, stated, “Following the increase in mortgage rates beginning last May, applications for mortgages have dropped, suggesting that rising interest rates are affecting housing. The Fed’s announcement last week that QE3 bond buying will continue for the time being may have only a limited, though favorable, impact on housing.”

The rapid increase in home prices has affected potential appreciation for many home owners who waited to sell their homes. And the increased inventory provided additional housing stock for eager home buyers. Given the recent increases in home sale prices, the expectation of an uncertain real estate market may not be welcome news by home buyers and sellers.

But home price increases have not only helped the housing market, but the economy as a whole. CoreLogic (corelogic.com) reported that the housing sector contributed about 17% to GDP growth during the first quarter of 2013. However, CoreLogic predicts that increasing mortgage rates will directly affect the housing market, and indirectly affect the overall economy: Single family housing starts (new homes) are thought to be declining because of increasing mortgage rates; and CoreLogic estimates that long term GDP growth to be about 1.75%.

It remains to be seen if modest increases in mortgage interest rates have been beneficial to stave off another housing bubble. However, given that the indicators and experts point to a housing recovery peak; increasing mortgage interest rates could suggest caution for the housing market.

Original located at https://dankrell.com/blog/2013/09/26/rising-interest-rates-a-help-and-hindrance-to-recovering-housing-market-2/

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By Dan Krell
Copyright © 2013

Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

September 12, 2013November 23, 2021

Dual agency debate continues; revealing results from recent real estate research

by Dan Krell © 2013
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Understanding representation in a real estate transaction can sometimes be tricky. You might think, after all, “If I work with a real estate agent, they represent me.” Not so fast; understanding whom real estate agents represent can be confusing in some situations, most notable is the concept of dual agency.

Maryland, like many other jurisdictions around the country, allows for dual agency. “The possibility of dual agency,” as described on the Maryland Real Estate Commission website (www.dllr.state.md.us/license/mrec/mrecrep.shtml), “…arises when the buyer’s agent and the seller’s agent both work for the same real estate company, and the buyer is interested in property listed by that company. The real estate broker or the broker’s designee, is called the “dual agent.” Dual agents do not act exclusively in the interests of either the seller or buyer, and therefore cannot give undivided loyalty to either party. There may be a conflict of interest because the interests of the seller and buyer may be different or adverse” [emphasis added].

Dual agency has been widely debated since its inception. And as the industry rapidly transforms, the issue is likely to continue to be a hot topic; for example, as real estate teams have become more prevalent in the marketplace, many argue that the potential for conflicts of interest in dual agency transactions becomes increasingly significant.

In his February 2010 Agbeat.com article (February 16, 2010; The Age Old Dual Agency in Real Estate Debate), Patrick Flynn states that although dual agency is legal in many jurisdictions, “…dual Agency is the ultimate no win scenario. Even if all parties agree in writing (and if you explained the likely pitfalls and risks to both parties…they never would agree) you simply cannot perform your prescribed duties…”

He continues to say that although there is potential for damage and irreparable harm to those involved in a dual agency transaction, most of these transactions close “without a hitch;” and the agent’s attention moves from common sense and integrity to the “little devil” on their shoulder that tells them, “Look at all the money you made!”

Recent research, investigating whether dual agency transactions are a result of agent incentives (e.g., money) or efficiency, suggests that the issue deserves further investigation to understand (among other things) the effects of dual agency, potential for conflicts, and to determine if buyers and sellers are poorly informed. Regardless, Brastow & Waller conclude in their 2013 study (Dual agency representation: Incentive conflicts or efficiencies? The Journal of Real Estate Research, 35(2), 199-222) that dual agency is more likely to occur at the beginning and end of a listing contract. When a dual agency sale occurs at the beginning of a listing, they conclude that it is a result of agent incentive and results in an efficient quick sale. However, when a dual agency sale occurs at the end of a listing contract it is usually due to agent incentive (e.g., avoiding loss of sale) and the home is more likely to sell for less.

Locally, the Maryland Real Estate Commission requires that real estate licensees, who are assisting you, provide disclosures describing agency relationships (including dual agency) “at the time of the first scheduled face to face contact with you.” Your agent can assist you in understanding dual agency, when it occurs, the potential issues of dual agency, as well as what should happen if you decide to not agree to dual agency.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. This article was originally published the week of September 9, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

August 30, 2013July 4, 2019

A glimpse into home buyer and seller behaviors

Buying and selling a home can be one of the most expensive and complex transactions you may undertake in your lifetime. Many are increasingly seeking assistance from real estate agents; according to the Highlights of the 2012 National Association of Realtors® Profile of Home Buyers and Sellers (realtor.org), eighty-nine percent of home buyers purchased their home through a real estate agent (a substantial increase from the sixty-one percent who indicated they purchased through an agent in 2001), while eighty-eight percent of sellers listed with an agent.

If you plan to hire a real estate agent, conventional wisdom dictates that you should interview several before choosing an agent. However, the logic is countered by the survey results. Approximately two-thirds of home buyers and sellers only contacted one agent. Additionally, a majority of buyers and sellers reported that the top means of finding their real estate agent was through a referral from a friend or family member. Forty percent of home buyers and thirty-eight percent of sellers found their agent through a referral from a family member or friend. First time home buyers were most reliant on their friends’ and family members’ referrals.

Repeat business was also a frequent way indicated in choosing a real estate agent. Although ninety percent of home buyers and eight-four percent of sellers reported that they would work with their agent again in the future; only twenty-three percent of home sellers and ten percent of buyers reported that they had worked with their agent in the past.

The internet is increasingly viewed as an important source of information for home buyers. Ninety percent of buyers surveyed indicated that they used the internet for their home search; the percentage rose to ninety-six for buyers under the age of 44.

Ultimately, your home purchase or sale falls upon the experience and skill of the agent you hire. Because of the increase in specialized transactions (such as short sales, 1031 exchanges, etc), it is probably a good idea to find out if the agent has the experience if your purchase or sale falls in this category.

A recent research study by Bennie Waller and Ali Jubran (“The Impact of Agent Experience on the Real Estate Transaction.” Journal of Housing Research 21, no. 1 (2012): 67-82) highlights the notion that an experienced agent can yield a better result than an inexperienced agent. They concluded that hiring a “veteran” agent will have a positive effect on your home sale. The data indicates that “rookie” agents, those who have had their real estate license two years or less, sell homes for less, take longer to sell homes, and are less efficient during the process.

Asking friends and family for referrals as well as calling the agent you previously worked with is a good way to find a real estate agent. However, vetting out potential issues can be achieved by asking the right questions before you hire them.

Regardless of how you find your real estate agent, it is probably a good idea to find out more about them. A conversation about their experience, knowledge, and expertise is probably a good way to start. Additionally, knowledge about the local market is extremely important these days as market trends have become hyper-local. Not understanding the neighborhood market can lead an agent to over or under price a home.

by Dan Krell
© 2013

August 21, 2013November 23, 2021

Home buyer’s privacy

In a time when there is increasing concerned about personal privacy, maybe it’s time for local Realtor® associations (such as the Greater Capital Area Association of Realtors®) to retire the Buyer’s Financial Information Sheet, or at least make major revisions to the form. The Buyer’s Financial Information Sheet is an invitation for abuse and misuse by those who may otherwise be well intentioned.

Sure, privacy laws have been recently enacted that prescribe protocols on the handling and disposal of sensitive personal information. However, there are no provisions to ensure that real estate brokers, agents, and those who have access to the personal data follow such precautions.

If you ask a real estate broker about the origination of the Buyer’s Financial Information Sheet, they might explain how agents needed a means to pre-qualify buyers in a time when loan officers’ pre-qualification letters had little meaning on their own. The tradition of a completed form portrays the buyer’s ability to purchase a home. Legal minds might go further to explain that the form may provide additional recourse for the home seller in case the buyer provides misleading and/or false information, and/or omits relevant information about their financial standing.

Today, many home buyers are pushing back (and rightly so) at the request to provide an abundance of specific financial and personal information to their agents, listing agents and sellers. For many home buyers, the resistance to sharing personal and financial information is not only because of discretion, but mainly because they feel the sharing of the information is redundant and ineffectual. Many home buyers have already provided similar (if not more) information to their loan officer so as to be issued a pre-qualification letter. Additional concerns include the use of buyer financial information to during contract negotiations.

Times change, and it’s time to take home buyer financial information out of the hands of real estate agents. The argument that sellers want to see the buyer’s ability to purchase is antiquated. Today, mortgage originators are licensed and take seriously approvals that are issued because consumers may have recourse; the loan officer usually performs a minimal level of due diligence.

Mortgage originators are required to undergo a federal and state criminal background checks for licensing. Additionally, lenders offer training on managing and disposing sensitive personal information; many lenders offer secure means of electronic transmission of sensitive data. Chances are that the agents involved in your transaction did not undergo a recent background check, much less the seller. But if you are asked to complete said form, you are expected to trust those who may handle and view it.

Additional problems that can occur when presented with the Buyer’s Financial Information Sheet include the compulsion by listing agents and home sellers to underwrite the buyer’s mortgage; they may indulge in deciding whether or not the buyer is mortgage worthy when they may be unqualified to do so. Additionally, listing agents and sellers are tempted to use the buyer’s financial information in negotiations; misguided sellers may regrettably lose a deal when they are told to hold out for a higher price from a buyer who may walk away from negotiation.

Protect home buyers and sellers: retire or change the Buyer’s Financial Information Sheet. Cash buyers can still provide proof of funds to purchase, while other buyers can provide a lender’s letter along with a “Buyer’s Financial Affidavit” that certifies that all information provided to their lender is accurate.

Original published at https://dankrell.com/blog/2013/08/21/home-buyers-privacy-an-argument-to-retire-the-financial-information-sheet/

By Dan Krell
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August 1, 2013June 30, 2019

Title insurance history, perspective, and necessity

Home buyers would like to consider themselves as being financially savvy. Of course, I often hear the question about buying a home without title insurance, which usually arises from the advice they may receive from some questionable source debating the necessity of title insurance. However, the importance of title insurance is highlighted by recent ownership disputes that have occurred in the last five years due to foreclosures, improperly recorded deeds and mortgage modifications.

Historically, title insurance came about as a necessity. According to the American Land Title Association (alta.org), title insurance resulted from a landmark court case in Pennsylvania in 1868, which found that home seller was not be responsible for a erroneous title opinion. Subsequently, the first title insurance company was formed in 1876 in Philadelphia. The company promoted itself by claiming that they would insure “the purchasers of real estate and mortgages against losses from defective title, liens and encumbrances;” thus increasing the speed and accuracy of the property transfer process.

Prior to the availability of title insurance, title examinations were conducted similarly to how they are today with the purpose of ensuring title marketability (ensuring title is free of unpaid liens, mortgages, and other encumbrances). However, prior to the offering of title insurance, property owners were often held responsible for title blemishes. Of course, unresolved tile disputes were often settled in court.

Initially, title insurance was often a local process. However, the title insurance industry surged along with an expanded housing market after World War II ended. Additionally, the use of lender’s title insurance grew along with the secondary mortgage market; because as the number of nationwide mortgage holders increased, lenders found that title insurance was necessary to protect their interests.

Researching a property’s title relies on the “recordation system.” Although the recordation system has been in use in most of United States in some cases before the formation of the country, many countries use a land registration. Land registration systems used in some countries typically do not provide the same recourse as does the recordation system when disputes arise; where the registering government may resolve these disputes.

Title insurance is a result of our recordation system that continues to this day, where property ownership can usually be determined by conveyance. Although the recordation system relies on transfer instruments that indicate a grantor, grantee, and property description; the system is not perfect. Issues can arise from unrecorded deeds, as well as erroneously recorded documents; fraud may also occur by recording falsified transfer documents with a complicit or unsuspecting clerk.

There are two types of title insurance that are offered: lender’s and owner’s. A lender’s policy is usually required by a mortgage lender and is thought to protect the interests of the lender by validating the lender’s validity and enforceability of the mortgage. The lender’s policy is typically issued for the mortgage amount and coverage decreases as the principal is paid down.

An owner’s title insurance policy is understood to protect the owner’s interest in the property, however there may be limitations. You should consult with your title attorney about the policy coverage and limitations. Policy coverage varies– so check with your title agent for pricing and coverage levels.

A Consumer Guide to Title Insurance is available from the Maryland Insurance Administration, the local State agency that regulates title insurance producers (insurance.maryland.gov).

By Dan Krell
Copyright © 2013

This article is not intended to provide nor should it be relied upon for legal and financial advice. Original published at https://dankrell.com

by Dan Krell © 2013 Google+ DanKrell.com

by Dan Krell © 2013
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DanKrell.com